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Frequently Asked Questions
  Staff Interpretation Letter 2006-26  
Identification Number 836
This is in response to your correspondence regarding whether certain proposed amendments (the “Amendments”) to the company’s equity compensation plan (the “Plan”) would require shareholder approval pursuant to Marketplace Listing Rule 4350(i)(1)(A) (the “Rule”).  Pursuant to the Amendments: (i) restricted stock awards (“RSAs”) would be permitted; and (ii) changes would be made to the vesting schedule for certain stock options (the “Vesting Revisions”).
According to the information you provided, the Plan currently authorizes the award of stock options, stock appreciation rights, and performance share awards (“PSAs”).  You stated that RSAs would be similar to PSAs, which are awards of the right to receive a specified number of shares of common stock contingent upon the achievement of specified performance objectives, including continued employment, over a specified time period.  RSAs would be awards of restricted stock subject to forfeiture if certain performance criteria are not met and/or employment with the company is terminated prior to the end of the restriction period.  For RSAs, the Plan administrator would have the authority to shorten or terminate the restricted period or waive any other restrictions.  Currently, for PSAs, the Plan administrator has the right to amend the terms of outstanding awards, subject to certain limitations.  In addition, as is currently authorized under the Plan for PSAs, for RSAs the Plan administrator would determine to whom such awards would be granted, the number of common shares subject to each award, and the vesting schedule including any performance criteria.  You stated that RSAs would be treated the same as PSAs for accounting, tax, and financial statement purposes.
Under the Vesting Revisions, the vesting period would be changed for stock options awarded to non-employee directors.  Currently, such options are vested and exercisable 50% on the date of grant, 25% one year after the grant date, and the remaining 25% two years after the grant date.  Pursuant to the Vesting Revision, the options would vest in annual increments of 25% beginning one year after the grant date.
Following our review of the information you provided, we have determined that the Amendments would not require shareholder approval under the Rule.  In that regard, we note that the addition of RSAs would not result in a material increase in benefits to participants, or in an expansion of the types of awards available, because RSAs would not be materially different from PSAs, which are currently permissible under the Plan.  Both types of awards involve the issuance of common stock, and both are subject to the terms and provisions determined by the Plan administrator.  In addition, the Vesting Revisions would not require shareholder approval because changes to delay vesting are not material amendments under the Rule.  We also note that the Amendments would not result in an increase in the number of shares to be issued under the Plan or in an expansion of the class of eligible participants.  Accordingly, the Rule does not require shareholder approval for the Amendments.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 836
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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